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Retirement Planning Beyond The Numbers

Webster's dictionary defines retirement as “a withdrawal from one’s position or occupation or from active working life.” For generations past, that was probably a pretty accurate description of retirement. You worked hard, often for one company, got your gold watch, retirement dinner, and your pension, and then lived a life of leisure (typically not for too many years after retirement). 

But today, our perspective on retirement has changed dramatically. Most Americans no longer have a company pension to rely on in retirement. The average life expectancy for a male did not increase to over age 65 until the 1950s. Now it is close to age 80. For many, retirement is really more of a transition to some other purposeful way to spend their time. For many millennials, the concept of retirement is completely foreign as they will go through many career changes during their lifetime.

The focus of much of the planning we do with clients is on the “technical” side of retirement. We work through an asset sufficiency analysis using Monte Carlo simulations to give you an idea of whether you are on the right track. A key component of this analysis is understanding your cash flow needs, often the hardest part for many of our clients. We integrate the impact of taxes into the planning, as this can be one of your biggest expenses in retirement. We then use this analysis to help us develop and manage your investment portfolio to meet your goals and objectives.

However, it is really the “personal” side of retirement planning that helps to lay the foundation for any of the analytical work that we do. We work with many clients who are going through various transitions in their lives. Retirement is one of the bigger transitions that we all face at some point. It is important to realize that transitions like this will alter a person’s identity, involving letting go of some part of yourself, but they also allow for new possibilities. 

Understanding your goals as you make this transition in retirement can help us to develop a better plan that ties together the personal and technical sides of retirement planning. Are you moving on to another career, focusing on “passion projects,” spending more time with family, or just trying to have more time to enjoy life? An important element of retirement planning revolves around your health. We realize some things are outside of your control, but we have seen how maintaining your health in retirement can lead to a much happier experience. 

A recent book by Harvard professor Arthur C. Brooks, “From Strength to Strength,” has some great perspectives on how we find success, happiness, and purpose in the second half of our lives. He describes “crystallized intelligence” (as opposed to fluid intelligence) as the ability to use a stock of knowledge learned in the past. He believes that devoting the back half of your life to serving others with your wisdom is critical to happy later years. Similar ideas are discussed in Chip Conley’s recent book “Wisdom at Work” and his perspective on the making of a “modern elder.” This is something that past civilizations have honored, and we have somehow lost touch with. 

As I think about the many clients we have worked with as they transitioned from a successful career to something else, one of the most important attributes is having a purpose in this new stage of life. Whether it is a second (or third) career, volunteer work in an area of interest, or another aspect that gives life meaning, doesn't really matter. The important thing is that you move into this next phase with purpose and focus. We have certainly seen other, less successful transitions to retirement. These often involved individuals who were just not ready to give up their prior identities and ones who did not find their purpose in this next stage of life as they moved beyond their careers. 

If you are approaching retirement, now would be a great time to step back and think hard about what you want your life to look like in retirement. Some people find it helpful to take a sabbatical or simply take a couple of months away from work so they have time to focus on this. If you are already in retirement and are struggling to find your identity or purpose without work, think about what truly brings you joy. Maybe there are activities you used to do but never had time for or things you always wanted to try but didn't have time to learn. As this recent article explains, you certainly aren't alone in this struggle, and it may take some time to find your way.

Understanding your goals and what is important to you at a deeper level is the foundation on which our retirement planning is built. Transitions like retirement are more than just a matter of not going to the office anymore, they require a very thoughtful approach to be successful. It is hard for us to develop good planning on the technical side without a solid understanding of key personal aspects and your deepest goals and objectives. While you might think of us more for our technical expertise, we have a lot of experience with these more emotional conversations and are always to talk through them with you. Don't be afraid to reach out!

- Lyle K Benson Jr., CPA, PFS, CFP

The views expressed represent the opinions of L.K. Benson & Company and are subject to change.  These views are not intended as a forecast, a guarantee of future results, investment recommendation, or an offer to buy or sell any securities. The information provided is of a general nature and should not be construed as investment advice or to provide any investment, tax, financial or legal advice or service to any person.

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